Should I Buy a Car Before Buying a House in Texas? What a $777 Car Payment Does to Your Mortgage Approval in 2026

Car payments have never been bigger. Edmunds reported that the average new-car monthly payment hit a record $777 in the second quarter of 2026, with an average APR of 7.0%, and a record 23.9% of buyers financing for 84 months or longer. On October 7, NPR ran a piece on the same theme: borrowing for a house or a car is about as expensive as it's been in years.

I'm Bond Peter Njoku (NMLS #2670329), a mortgage loan officer in Garland, and here's the part those stories don't cover: if you're planning to buy a home in the next year, a new car loan can cost you far more than the car. It can cost you tens of thousands of dollars of house, and sometimes the approval itself. Let me show you the math with real DFW numbers.

How does a car loan affect my mortgage approval?

Through three channels:

1. Debt-to-income ratio (DTI). Lenders add your car payment to your other monthly debts and your new house payment, then divide by your gross monthly income. Most conventional and FHA approvals I see top out somewhere around 45% to 50%, depending on credit and the automated underwriting findings.
2. Credit. A new loan means a hard inquiry and a brand-new account, which can lower your score a few points. If you're near a pricing tier, that can raise your rate.
3. Cash. A down payment on a car can drain the savings you need for your home's down payment, closing costs, and the reserves underwriters like to see.

Of the three, DTI does the most damage, and it does it quietly.

How much house does a $777 car payment cost me?

Take a DFW buyer earning $90,000 a year ($7,500 a month), with $250 a month in other debts, qualifying at a 45% DTI limit. I'm assuming 5% down, a 7.40% 30-year rate (Freddie Mac PMMS, week of October 8, 2026), Dallas County's roughly 2.0% effective property tax rate, $2,600 a year in homeowners insurance, and mortgage insurance of about 0.5% of the loan per year.

Read that bottom row again. The average new-car payment moves this buyer from a $336,000 home, which buys a lot of options in Garland, Mesquite, or Royse City, down to about $247,000. That's roughly $116 of house lost for every $1 of monthly car payment, or about $11,600 per $100.

This is worse in Texas than in many states because our property taxes take a big bite out of the same housing budget. I explain why in my post on how Texas property taxes affect your DTI.

What if I buy the car after I'm pre-approved?

This is the most expensive version of the mistake. Your pre-approval was based on your debts on the day your credit was pulled. Lenders typically re-check credit before closing, and many monitor for new accounts throughout the loan. If a new car loan shows up:

• Your DTI is recalculated, and if it goes over the limit, the approval can be reduced or withdrawn.
• Your file may need to be re-underwritten, which can push your closing date past your rate lock.
• Your seller and agent are left waiting, and in Texas your option period has usually already ended, which can put your earnest money at risk depending on your contract.

My advice is simple: no new credit of any kind between pre-approval and closing. Not a car, not furniture on a store card, not a new credit card for the sign-up bonus. Wait until after you have the keys.

Do car loans with only a few payments left count?

This is where good news sometimes hides:

If your car loan is close to paid off, it may not count at all. And if you have the cash, paying off a car with a few thousand dollars left can sometimes raise your approval by more than the same money would add as a down payment. I run that comparison for clients because it's not intuitive. But don't pay anything off without asking first, because you also need that cash for closing and reserves.

A Rockwall buyer who needed a car first

Here's a composite case. A nurse moving to Rockwall needed a reliable car for 12-hour shifts at a hospital across the county. Her old car was dying, so waiting until after closing wasn't realistic. She earned about $86,000, and the dealership quoted her a new SUV at $790 a month for 84 months.

We ran it before she signed. At $790 a month, her maximum price would have dropped well below the Rockwall homes she was looking at. Instead, she bought a three-year-old sedan at $395 a month on a 60-month term. That still cost her about $45,000 of buying power, but it kept her in range for a home around $300,000 with a Rockwall FHA loan. The shorter term also meant the car would be paid off years sooner. She closed four months later.

When does it make sense to buy a car first?

• You need the car to keep your job. Income is the foundation of your approval. Protect it.
• Your DTI has plenty of room. If your house payment plus debts are well under the limit, a modest car payment may not change your approval.
• You can pay cash without touching your down payment, closing costs, or reserves.
• You can keep the payment small: a used car, a bigger trade-in, a shorter term, and no lease.

In every one of those cases, the order of operations is the same: talk to your loan officer first, then the dealership. A ten-minute call can tell you whether that car costs you nothing or $90,000 of house.